Fourth-quarter 2021 highlights
- Revenues increased 1 percent to
$2.04 billion , from$2.01 billion in Q4 2020 - Reported OR increased by 530 basis points to 59.2 percent from 53.9 percent. The OR in the fourth quarter of 2021 includes
$36 million in costs related to the Kansas City Southern acquisition - Adjusted OR, which excludes the acquisition-related costs, increased 360 basis points to 57.5 percent
- Diluted EPS decreased to
$0.74 , from$1.19 in Q4 2020, while adjusted diluted EPS decreased to$0.95 , from$1.01 in Q4 2020
"I am tremendously proud of the resilience the CP team demonstrated to deliver these results. CP's world-class railroaders relied on our strong operating model and commitment to controlling what we can control to safely deliver for customers and shareholders despite the unique challenges faced in the quarter," said
"This quarter we also reached a crucial milestone in our journey to create the first single-line rail network linking the
Full-year 2021 highlights
Federal Railroad Administration ("FRA")-reportable personal injuries declined 17 percent to a record-low 0.92 from the previous record-low of 1.11 in 2020- Revenues increased 4 percent to
$8.0 billion , from$7.71 billion in 2020 - OR increased 280 basis points to 59.9 percent
- Adjusted OR increased 50 basis points to 57.6 percent
- Diluted EPS increased to
$4.18 from$3.59 , while adjusted diluted EPS increased to$3.76 , from$3.53 in 2020
"During a historic year for CP, our dedicated team confronted the adversity we faced throughout 2021 head-on with grit and tenacity," said Creel. "I am excited for what lies ahead with this franchise as we move past the uncertainty and extensive supply chain disruptions created by the COVID-19 pandemic. The demand environment and overall economic strength, combined with CP's unique initiatives and service excellence, have us well-positioned to drive profitable growth for our customers, employees and shareholders. These factors, coupled with the progression of our proposed combination with Kansas City Southern, position CP for another history-making year."
1 These measures have no standardized meanings prescribed by accounting principles generally accepted in
Conference Call Details
CP will discuss its results with the financial community in a conference call beginning at
Conference Call Access
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Webcast
We encourage you to access the webcast and presentation material in the Investors section of CP's website at investor.cpr.ca.
A replay of the fourth-quarter conference call will be available by phone through to
Note on forward-looking information
This news release may contain certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "should" or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited to statements concerning, cost control efforts, the success of our business, changes to economic and industry conditions, our operations, priorities and plans, anticipated financial and operational performance, business prospects and demand for our services and growth opportunities.
The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CP's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations to CP; and the anticipated impacts of the COVID-19 pandemic on CP businesses, operating results, cash flows and/or financial condition. Although CP believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.
Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CP's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian,
Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.
About Canadian Pacific
Canadian Pacific is a transcontinental railway in
FINANCIAL INFORMATION
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the three months | For the year ended | |||||||
(in millions of Canadian dollars, except share and per share data) | 2021 | 2020 | 2021 | 2020 | ||||
Revenues | ||||||||
Freight | $ | 1,994 | $ | 1,968 | $ | 7,816 | $ | 7,541 |
Non-freight | 46 | 44 | 179 | 169 | ||||
Total revenues | 2,040 | 2,012 | 7,995 | 7,710 | ||||
Operating expenses | ||||||||
Compensation and benefits | 405 | 433 | 1,570 | 1,560 | ||||
Fuel | 231 | 169 | 854 | 652 | ||||
Materials | 51 | 54 | 215 | 216 | ||||
Equipment rents | 29 | 34 | 121 | 142 | ||||
Depreciation and amortization | 206 | 197 | 811 | 779 | ||||
Purchased services and other (Note 4) | 286 | 197 | 1,218 | 1,050 | ||||
Total operating expenses | 1,208 | 1,084 | 4,789 | 4,399 | ||||
Operating income | 832 | 928 | 3,206 | 3,311 | ||||
Less: | ||||||||
Equity loss of Kansas City Southern (Note 4) | 141 | — | 141 | — | ||||
Other (income) expense (Note 2) | (16) | (96) | 237 | (7) | ||||
Merger termination fee (Note 4) | — | — | (845) | — | ||||
Other components of net periodic benefit recovery | (101) | (85) | (387) | (342) | ||||
Net interest expense | 125 | 112 | 440 | 458 | ||||
Income before income tax expense | 683 | 997 | 3,620 | 3,202 | ||||
Income tax expense (Note 3) | 151 | 195 | 768 | 758 | ||||
Net income | $ | 532 | $ | 802 | $ | 2,852 | $ | 2,444 |
Earnings per share (Note 1) | ||||||||
Basic earnings per share | $ | 0.74 | $ | 1.19 | $ | 4.20 | $ | 3.61 |
Diluted earnings per share | $ | 0.74 | $ | 1.19 | $ | 4.18 | $ | 3.59 |
Weighted-average number of shares (millions) (Note 1) | ||||||||
Basic | 718.4 | 671.0 | 679.7 | 677.2 | ||||
Diluted | 721.3 | 674.1 | 682.8 | 679.9 | ||||
Dividends declared per share (Note 1) | $ | 0.1900 | $ | 0.1900 | $ | 0.7600 | $ | 0.7120 |
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
For the three months | For the year ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Net income | $ | 532 | $ | 802 | $ | 2,852 | $ | 2,444 |
Net (loss) gain in foreign currency translation adjustments, net of | (294) | 36 | (291) | 18 | ||||
Change in derivatives designated as cash flow hedges(1) | (21) | 4 | 48 | 10 | ||||
Change in pension and post-retirement defined benefit plans (Note 6) | 1,128 | (541) | 1,286 | (407) | ||||
Equity accounted investments(1) | 9 | (1) | 9 | (1) | ||||
Other comprehensive income (loss) before income taxes | 822 | (502) | 1,052 | (380) | ||||
Income tax (expense) recovery on above items | (282) | 104 | (341) | 88 | ||||
Other comprehensive income (loss) | 540 | (398) | 711 | (292) | ||||
Comprehensive income | $ | 1,072 | $ | 404 | $ | 3,563 | $ | 2,152 |
(1) Comparative figures have been reclassified to conform with current period presentation. |
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
(in millions of Canadian dollars) | 2021 | 2020 | ||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ | 69 | $ | 147 |
Restricted cash and cash equivalents | 13 | — | ||
Accounts receivable, net | 819 | 825 | ||
Materials and supplies | 235 | 208 | ||
Other current assets | 216 | 141 | ||
1,352 | 1,321 | |||
Investment in Kansas City Southern (Note 4) | 42,309 | — | ||
Investments | 209 | 199 | ||
Properties | 21,200 | 20,422 | ||
371 | 366 | |||
Pension asset (Note 6) | 2,317 | 894 | ||
Other assets | 419 | 438 | ||
Total assets | $ | 68,177 | $ | 23,640 |
Liabilities and shareholders' equity | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | $ | 1,609 | $ | 1,467 |
Long-term debt maturing within one year (Note 5) | 1,550 | 1,186 | ||
3,159 | 2,653 | |||
Pension and other benefit liabilities (Note 6) | 718 | 832 | ||
Other long-term liabilities | 542 | 585 | ||
Long-term debt (Note 5) | 18,577 | 8,585 | ||
Deferred income taxes (Note 3) | 11,352 | 3,666 | ||
Total liabilities | 34,348 | 16,321 | ||
Shareholders' equity | ||||
Share capital (Note 4) | 25,475 | 1,983 | ||
Additional paid-in capital | 66 | 55 | ||
Accumulated other comprehensive loss | (2,103) | (2,814) | ||
Retained earnings | 10,391 | 8,095 | ||
33,829 | 7,319 | |||
Total liabilities and shareholders' equity | $ | 68,177 | $ | 23,640 |
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months | For the year ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Operating activities | ||||||||
Net income | $ | 532 | $ | 802 | $ | 2,852 | $ | 2,444 |
Reconciliation of net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 206 | 197 | 811 | 779 | ||||
Deferred income tax expense | 52 | 88 | 242 | 221 | ||||
Pension recovery and funding | (61) | (58) | (249) | (250) | ||||
Equity loss of Kansas City Southern (Note 4) | 141 | — | 141 | — | ||||
Foreign exchange loss (gain) on debt and lease liabilities (Note 2) | 32 | (103) | (7) | (14) | ||||
Other operating activities, net | 14 | — | (36) | 11 | ||||
Change in non-cash working capital balances related to operations | (312) | 59 | (66) | (389) | ||||
Cash provided by operating activities | 604 | 985 | 3,688 | 2,802 | ||||
Investing activities | ||||||||
Additions to properties | (421) | (330) | (1,532) | (1,671) | ||||
Investment in Kansas City Southern (Note 4) | (10,526) | — | (12,299) | — | ||||
Investment in | — | (398) | — | (398) | ||||
Investment in | — | — | — | 19 | ||||
Proceeds from sale of properties and other assets | 31 | 13 | 96 | 22 | ||||
Other | 6 | (2) | 5 | (2) | ||||
Cash used in investing activities | (10,910) | (717) | (13,730) | (2,030) | ||||
Financing activities | ||||||||
Dividends paid | (127) | (128) | (507) | (467) | ||||
Issuance of CP Common Shares | 5 | 20 | 25 | 52 | ||||
Purchase of CP Common Shares | — | (564) | — | (1,509) | ||||
Issuance of long-term debt, excluding commercial paper (Note 5) | 10,673 | — | 10,673 | 958 | ||||
Repayment of long-term debt, excluding commercial paper | (10) | (10) | (359) | (84) | ||||
Proceeds from term loan | — | — | 633 | — | ||||
Net (repayment) issuance of commercial paper (Note 5) | (388) | 384 | (454) | 270 | ||||
Net increase in short-term borrowings | — | — | — | 5 | ||||
Acquisition-related financing fees | (6) | — | (51) | — | ||||
Other | (17) | — | (24) | 11 | ||||
Cash provided by (used in) financing activities | 10,130 | (298) | 9,936 | (764) | ||||
Effect of foreign currency fluctuations on | 35 | (6) | 41 | 6 | ||||
Cash position | ||||||||
(Decrease) increase in cash, cash equivalents, and restricted cash | (141) | (36) | (65) | 14 | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 223 | 183 | 147 | 133 | ||||
Cash, cash equivalents, and restricted cash at end of period | $ | 82 | $ | 147 | $ | 82 | $ | 147 |
Supplemental disclosures of cash flow information: | ||||||||
Income taxes paid | $ | 151 | $ | 127 | $ | 552 | $ | 582 |
Interest paid | $ | 61 | $ | 60 | $ | 426 | $ | 443 |
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
For the three months ended | |||||||||||||
(in millions of Canadian dollars except per | Common | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | |||||||
Balance at | 666.9 | $ | 2,008 | $ | 68 | $ | (2,643) | $ | 10,035 | $ | 9,468 | ||
Net income | — | — | — | — | 532 | 532 | |||||||
Other comprehensive income | — | — | — | 540 | — | 540 | |||||||
Dividends declared ( | — | — | — | — | (176) | (176) | |||||||
Effect of stock-based compensation | — | — | 5 | — | — | 5 | |||||||
Shares issued for Kansas City Southern | 262.6 | 23,461 | (5) | — | — | 23,456 | |||||||
Shares issued under stock option plan | 0.2 | 6 | (2) | — | — | 4 | |||||||
Balance at | 929.7 | $ | 25,475 | $ | 66 | $ | (2,103) | $ | 10,391 | $ | 33,829 | ||
Balance at | 672.5 | $ | 1,978 | $ | 56 | $ | (2,416) | $ | 7,961 | $ | 7,579 | ||
Net income | — | — | — | — | 802 | 802 | |||||||
Other comprehensive loss | — | — | — | (398) | — | (398) | |||||||
Dividends declared ( | — | — | — | — | (126) | (126) | |||||||
Effect of stock-based compensation | — | — | 4 | — | — | 4 | |||||||
CP Common Shares repurchased | (6.7) | (19) | — | — | (542) | (561) | |||||||
Shares issued under stock option plan | 0.5 | 24 | (5) | — | — | 19 | |||||||
Balance at | 666.3 | $ | 1,983 | $ | 55 | $ | (2,814) | $ | 8,095 | $ | 7,319 |
For the year ended | |||||||||||||
(in millions of Canadian dollars except per | Common | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | |||||||
Balance at | 666.3 | $ | 1,983 | $ | 55 | $ | (2,814) | $ | 8,095 | $ | 7,319 | ||
Net income | — | — | — | — | 2,852 | 2,852 | |||||||
Other comprehensive income | — | — | — | 711 | — | 711 | |||||||
Dividends declared ( | — | — | — | — | (556) | (556) | |||||||
Effect of stock-based compensation | — | — | 23 | — | — | 23 | |||||||
Shares issued for Kansas City Southern | 262.6 | 23,461 | (5) | — | — | 23,456 | |||||||
Shares issued under stock option plan | 0.8 | 31 | (7) | — | — | 24 | |||||||
Balance at | 929.7 | $ | 25,475 | $ | 66 | $ | (2,103) | $ | 10,391 | $ | 33,829 | ||
Balance at | 685.0 | $ | 1,993 | $ | 48 | $ | (2,522) | $ | 7,549 | $ | 7,068 | ||
Net income | — | — | — | — | 2,444 | 2,444 | |||||||
Other comprehensive loss | — | — | — | (292) | — | (292) | |||||||
Dividends declared ( | — | — | — | — | (479) | (479) | |||||||
Effect of stock-based compensation | — | — | 17 | — | — | 17 | |||||||
CP Common Shares repurchased | (20.4) | (58) | — | — | (1,419) | (1,477) | |||||||
Shares issued under stock option plan | 1.7 | 48 | (10) | — | — | 38 | |||||||
Balance at | 666.3 | $ | 1,983 | $ | 55 | $ | (2,814) | $ | 8,095 | $ | 7,319 |
See Notes to Interim Consolidated Financial Information.
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
December 31, 2021
(unaudited)
1 Basis of presentation
This unaudited interim consolidated financial information of
On
CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons.
In management's opinion, the unaudited interim consolidated financial information includes all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.
2 Other (income) expense
For the three months | For the year ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Foreign exchange loss (gain) on debt and lease liabilities | $ | 32 | $ | (103) | $ | (7) | $ | (14) |
Other foreign exchange losses (gains) | 5 | 1 | (4) | (1) | ||||
Acquisition-related (recoveries) costs (Note 4) | (48) | — | 247 | — | ||||
Other | (5) | 6 | 1 | 8 | ||||
Other (income) expense | $ | (16) | $ | (96) | $ | 237 | $ | (7) |
3 Income taxes
During the fourth quarter and for the year ended 2021, the Company recorded a deferred tax liability of
During the fourth quarter and for the year ended 2021, the Company recorded a deferred tax recovery of $33 million (
During the fourth quarter and for the year ended 2020, the Company revalued its deferred income tax balances as a result of a corporate income tax rate decrease due to a change relating to a tax return filing election for the state of
4 Business acquisition
On
Under the terms of the Merger Agreement, the Company issued approximately 262.6 million Common Shares to existing KCS common stockholders at the exchange ratio of 2.884 Common Shares per share of KCS common stock held (valued at approximately
CP accounts for its investment in KCS of
During the second quarter of 2021, the Company received a merger termination fee of $845 million (
5 Debt
Issuance of long-term debt
During the fourth quarter of 2021, the Company issued the following securities for total net proceeds of
Date issued | Description of securities | Maturity | Net proceeds |
In conjunction with the above debt issuances, the Company settled all outstanding forward starting floating-to-fixed interest rate swap and interest rate bond lock hedges for a net payment of
Commercial paper program
The Company has a commercial paper program which enables it to issue commercial paper up to a maximum aggregate principal amount of
6 Pension and other benefits
The Company's defined benefit pension and post-retirement benefit plans were remeasured at
Summary of Rail Data
Fourth Quarter | Year | |||||||||||||||
Financial (millions, except per share data) | 2021 | 2020 | Total | % | 2021 | 2020 | Total | % | ||||||||
Revenues | ||||||||||||||||
Freight | $ | 1,994 | $ | 1,968 | $ | 26 | 1 | $ | 7,816 | $ | 7,541 | $ | 275 | 4 | ||
Non-freight | 46 | 44 | 2 | 5 | 179 | 169 | 10 | 6 | ||||||||
Total revenues | 2,040 | 2,012 | 28 | 1 | 7,995 | 7,710 | 285 | 4 | ||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 405 | 433 | (28) | (6) | 1,570 | 1,560 | 10 | 1 | ||||||||
Fuel | 231 | 169 | 62 | 37 | 854 | 652 | 202 | 31 | ||||||||
Materials | 51 | 54 | (3) | (6) | 215 | 216 | (1) | — | ||||||||
Equipment rents | 29 | 34 | (5) | (15) | 121 | 142 | (21) | (15) | ||||||||
Depreciation and amortization | 206 | 197 | 9 | 5 | 811 | 779 | 32 | 4 | ||||||||
Purchased services and other | 286 | 197 | 89 | 45 | 1,218 | 1,050 | 168 | 16 | ||||||||
Total operating expenses | 1,208 | 1,084 | 124 | 11 | 4,789 | 4,399 | 390 | 9 | ||||||||
Operating income | 832 | 928 | (96) | (10) | 3,206 | 3,311 | (105) | (3) | ||||||||
Less: | ||||||||||||||||
Equity loss of Kansas City Southern | 141 | — | 141 | 100 | 141 | — | 141 | 100 | ||||||||
Other (income) expense | (16) | (96) | 80 | (83) | 237 | (7) | 244 | (3,486) | ||||||||
Merger termination fee | — | — | — | — | (845) | — | (845) | 100 | ||||||||
Other components of net periodic benefit recovery | (101) | (85) | (16) | 19 | (387) | (342) | (45) | 13 | ||||||||
Net interest expense | 125 | 112 | 13 | 12 | 440 | 458 | (18) | (4) | ||||||||
Income before income tax expense | 683 | 997 | (314) | (31) | 3,620 | 3,202 | 418 | 13 | ||||||||
Income tax expense | 151 | 195 | (44) | (23) | 768 | 758 | 10 | 1 | ||||||||
Net income | $ | 532 | $ | 802 | $ | (270) | (34) | $ | 2,852 | $ | 2,444 | $ | 408 | 17 | ||
Operating ratio (%) | 59.2 | 53.9 | 5.3 | 530 bps | 59.9 | 57.1 | 2.8 | 280 bps | ||||||||
Basic earnings per share(1) | $ | 0.74 | $ | 1.19 | $ | (0.45) | (38) | $ | 4.20 | $ | 3.61 | $ | 0.59 | 16 | ||
Diluted earnings per share(1) | $ | 0.74 | $ | 1.19 | $ | (0.45) | (38) | $ | 4.18 | $ | 3.59 | $ | 0.59 | 16 | ||
Shares Outstanding(1) | ||||||||||||||||
Weighted average number of basic shares | 718.4 | 671.0 | 47.4 | 7 | 679.7 | 677.2 | 2.5 | — | ||||||||
Weighted average number of diluted shares | 721.3 | 674.1 | 47.2 | 7 | 682.8 | 679.9 | 2.9 | — | ||||||||
Foreign Exchange | ||||||||||||||||
Average foreign exchange rate (U.S.$/Canadian$) | 0.79 | 0.77 | 0.02 | 3 | 0.80 | 0.75 | 0.05 | 7 | ||||||||
Average foreign exchange rate (Canadian$/U.S.$) | 1.26 | 1.30 | (0.04) | (3) | 1.25 | 1.34 | (0.09) | (7) |
(1) | As a result of the five-for-one share split of the Company's issued and outstanding Common Shares, which began trading on a post-split basis on |
Summary of Rail Data (Continued)
Fourth Quarter | Year | ||||||||||||||||
Commodity Data | 2021 | 2020 | Total | % | FX | 2021 | 2020 | Total | % | FX | |||||||
Freight Revenues (millions) | |||||||||||||||||
- Grain | $ | 440 | $ | 508 | $ | (68) | (13) | (12) | $ | 1,684 | $ | 1,829 | $ | (145) | (8) | (5) | |
- Coal | 134 | 155 | (21) | (14) | (14) | 625 | 566 | 59 | 10 | 11 | |||||||
- Potash | 115 | 103 | 12 | 12 | 14 | 463 | 493 | (30) | (6) | (3) | |||||||
- Fertilizers and sulphur | 78 | 78 | — | — | 3 | 305 | 290 | 15 | 5 | 11 | |||||||
- Forest products | 89 | 84 | 5 | 6 | 10 | 348 | 328 | 20 | 6 | 12 | |||||||
- Energy, chemicals and plastics | 414 | 366 | 48 | 13 | 15 | 1,563 | 1,519 | 44 | 3 | 7 | |||||||
- Metals, minerals and consumer products | 193 | 155 | 38 | 25 | 28 | 728 | 629 | 99 | 16 | 22 | |||||||
- Automotive | 87 | 109 | (22) | (20) | (18) | 376 | 324 | 52 | 16 | 22 | |||||||
- Intermodal | 444 | 410 | 34 | 8 | 9 | 1,724 | 1,563 | 161 | 10 | 12 | |||||||
Total Freight Revenues | $ | 1,994 | $ | 1,968 | $ | 26 | 1 | 3 | $ | 7,816 | $ | 7,541 | $ | 275 | 4 | 7 | |
Freight Revenue per Revenue Ton- | |||||||||||||||||
- Grain | 4.66 | 4.23 | 0.43 | 10 | 12 | 4.43 | 4.38 | 0.05 | 1 | 4 | |||||||
- Coal | 3.44 | 2.92 | 0.52 | 18 | 18 | 3.41 | 3.06 | 0.35 | 11 | 12 | |||||||
- Potash | 2.90 | 2.50 | 0.40 | 16 | 18 | 2.78 | 2.62 | 0.16 | 6 | 9 | |||||||
- Fertilizers and sulphur | 6.66 | 6.02 | 0.64 | 11 | 14 | 6.30 | 6.19 | 0.11 | 2 | 7 | |||||||
- Forest products | 6.23 | 5.87 | 0.36 | 6 | 10 | 6.09 | 5.97 | 0.12 | 2 | 8 | |||||||
- Energy, chemicals and plastics | 6.74 | 5.91 | 0.83 | 14 | 16 | 6.14 | 6.28 | (0.14) | (2) | 1 | |||||||
- Metals, minerals and consumer products | 6.79 | 6.53 | 0.26 | 4 | 7 | 6.52 | 6.75 | (0.23) | (3) | 2 | |||||||
- Automotive | 22.48 | 22.95 | (0.47) | (2) | 1 | 21.30 | 24.53 | (3.23) | (13) | (9) | |||||||
- Intermodal | 6.63 | 5.81 | 0.82 | 14 | 15 | 6.22 | 5.61 | 0.61 | 11 | 13 | |||||||
Total Freight Revenue per RTM | 5.54 | 4.89 | 0.65 | 13 | 15 | 5.22 | 4.96 | 0.26 | 5 | 8 | |||||||
Freight Revenue per Carload | |||||||||||||||||
- Grain | $ | 4,297 | $ | 3,719 | $ | 578 | 16 | 17 | $ | 3,951 | $ | 3,810 | $ | 141 | 4 | 6 | |
- Coal | 1,991 | 2,103 | (112) | (5) | (5) | 2,144 | 2,174 | (30) | (1) | (1) | |||||||
- Potash | 3,186 | 2,869 | 317 | 11 | 13 | 3,068 | 3,026 | 42 | 1 | 5 | |||||||
- Fertilizers and sulphur | 4,875 | 4,906 | (31) | (1) | 2 | 4,736 | 4,708 | 28 | 1 | 6 | |||||||
- Forest products | 4,811 | 4,641 | 170 | 4 | 8 | 4,728 | 4,581 | 147 | 3 | 9 | |||||||
- Energy, chemicals and plastics | 5,267 | 4,541 | 726 | 16 | 18 | 4,883 | 4,919 | (36) | (1) | 3 | |||||||
- Metals, minerals and consumer products | 3,244 | 2,914 | 330 | 11 | 14 | 3,076 | 3,034 | 42 | 1 | 7 | |||||||
- Automotive | 3,655 | 3,132 | 523 | 17 | 20 | 3,443 | 3,054 | 389 | 13 | 18 | |||||||
- Intermodal | 1,752 | 1,470 | 282 | 19 | 20 | 1,622 | 1,489 | 133 | 9 | 11 | |||||||
Total Freight Revenue per Carload | $ | 3,041 | $ | 2,704 | $ | 337 | 12 | 14 | $ | 2,857 | $ | 2,784 | $ | 73 | 3 | 6 |
(1) | This earnings measure has no standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. This measure is defined and reconciled in Non-GAAP Measures of this Earnings Release. |
Summary of Rail Data (Continued)
Fourth Quarter | Year | ||||||||
Commodity Data (Continued) | 2021 | 2020 | Total | % | 2021 | 2020 | Total | % | |
Millions of RTM | |||||||||
- Grain | 9,435 | 12,013 | (2,578) | (21) | 37,999 | 41,747 | (3,748) | (9) | |
- Coal | 3,894 | 5,301 | (1,407) | (27) | 18,345 | 18,510 | (165) | (1) | |
- Potash | 3,966 | 4,120 | (154) | (4) | 16,671 | 18,784 | (2,113) | (11) | |
- Fertilizers and sulphur | 1,172 | 1,296 | (124) | (10) | 4,845 | 4,683 | 162 | 3 | |
- Forest products | 1,428 | 1,432 | (4) | — | 5,718 | 5,491 | 227 | 4 | |
- Energy, chemicals and plastics | 6,141 | 6,191 | (50) | (1) | 25,469 | 24,172 | 1,297 | 5 | |
- Metals, minerals and consumer products | 2,842 | 2,374 | 468 | 20 | 11,170 | 9,325 | 1,845 | 20 | |
- Automotive | 387 | 475 | (88) | (19) | 1,765 | 1,321 | 444 | 34 | |
- Intermodal | 6,696 | 7,054 | (358) | (5) | 27,704 | 27,858 | (154) | (1) | |
Total RTMs | 35,961 | 40,256 | (4,295) | (11) | 149,686 | 151,891 | (2,205) | (1) | |
Carloads (thousands) | |||||||||
- Grain | 102.4 | 136.6 | (34.2) | (25) | 426.2 | 480.1 | (53.9) | (11) | |
- Coal | 67.3 | 73.7 | (6.4) | (9) | 291.5 | 260.4 | 31.1 | 12 | |
- Potash | 36.1 | 35.9 | 0.2 | 1 | 150.9 | 162.9 | (12.0) | (7) | |
- Fertilizers and sulphur | 16.0 | 15.9 | 0.1 | 1 | 64.4 | 61.6 | 2.8 | 5 | |
- Forest products | 18.5 | 18.1 | 0.4 | 2 | 73.6 | 71.6 | 2.0 | 3 | |
- Energy, chemicals and plastics | 78.6 | 80.6 | (2.0) | (2) | 320.1 | 308.8 | 11.3 | 4 | |
- Metals, minerals and consumer products | 59.5 | 53.2 | 6.3 | 12 | 236.7 | 207.3 | 29.4 | 14 | |
- Automotive | 23.8 | 34.8 | (11.0) | (32) | 109.2 | 106.1 | 3.1 | 3 | |
- Intermodal | 253.4 | 279.0 | (25.6) | (9) | 1,062.9 | 1,049.6 | 13.3 | 1 | |
Total Carloads | 655.6 | 727.8 | (72.2) | (10) | 2,735.5 | 2,708.4 | 27.1 | 1 |
Fourth Quarter | Year | ||||||||||||||||
2021 | 2020 | Total | % | FX | 2021 | 2020 | Total | % | FX | ||||||||
Operating Expenses (millions) | |||||||||||||||||
Compensation and benefits | $ | 405 | $ | 433 | $ | (28) | (6) | (6) | $ | 1,570 | $ | 1,560 | $ | 10 | 1 | 2 | |
Fuel | 231 | 169 | 62 | 37 | 40 | 854 | 652 | 202 | 31 | 37 | |||||||
Materials | 51 | 54 | (3) | (6) | (6) | 215 | 216 | (1) | — | 1 | |||||||
Equipment rents | 29 | 34 | (5) | (15) | (12) | 121 | 142 | (21) | (15) | (10) | |||||||
Depreciation and amortization | 206 | 197 | 9 | 5 | 6 | 811 | 779 | 32 | 4 | 6 | |||||||
Purchased services and other | 286 | 197 | 89 | 45 | 47 | 1,218 | 1,050 | 168 | 16 | 19 | |||||||
Total Operating Expenses | $ | 1,208 | $ | 1,084 | $ | 124 | 11 | 13 | $ | 4,789 | $ | 4,399 | $ | 390 | 9 | 12 |
(1) | This earnings measure has no standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. This measure is defined and reconciled in Non-GAAP Measures of this Earnings Release. |
Summary of Rail Data (Continued)
Fourth Quarter | Year | ||||||||
2021 | 2020 | Total | % | 2021 | 2020 | Total | % | ||
Operations Performance | |||||||||
Gross ton-miles ("GTMs") (millions) | 64,574 | 71,977 | (7,403) | (10) | 271,921 | 272,360 | (439) | — | |
Train miles (thousands) | 6,991 | 7,844 | (853) | (11) | 29,397 | 30,324 | (927) | (3) | |
Average train weight - excluding local traffic (tons) | 10,011 | 9,889 | 122 | 1 | 9,967 | 9,707 | 260 | 3 | |
Average train length - excluding local traffic (feet) | 8,229 | 8,207 | 22 | — | 8,200 | 7,929 | 271 | 3 | |
Average terminal dwell (hours) | 7.5 | 6.7 | 0.8 | 12 | 7.2 | 6.5 | 0.7 | 11 | |
Average train speed (miles per hour, or "mph")(1) | 22.3 | 21.9 | 0.4 | 2 | 21.6 | 22.0 | (0.4) | (2) | |
Locomotive productivity (GTMs / operating horsepower)(2) | 193 | 207 | (14) | (7) | 201 | 207 | (6) | (3) | |
Fuel efficiency(3) | 0.941 | 0.948 | (0.007) | (1) | 0.931 | 0.942 | (0.011) | (1) | |
60.8 | 68.2 | (7.4) | (11) | 253.3 | 256.7 | (3.4) | (1) | ||
Average fuel price ( | 3.03 | 1.91 | 1.12 | 59 | 2.70 | 1.90 | 0.80 | 42 | |
Total Employees and Workforce | |||||||||
Total employees (average)(5) | 12,113 | 12,028 | 85 | 1 | 12,337 | 12,168 | 169 | 1 | |
Total employees (end of period)(5) | 11,834 | 11,890 | (56) | — | 11,834 | 11,890 | (56) | — | |
Workforce (end of period)(6) | 11,872 | 11,904 | (32) | — | 11,872 | 11,904 | (32) | — | |
Safety Indicators(7) | |||||||||
FRA personal injuries per 200,000 employee-hours | 0.71 | 1.11 | (0.40) | (36) | 0.92 | 1.11 | (0.19) | (17) | |
FRA train accidents per million train-miles | 1.03 | 0.70 | 0.33 | 47 | 1.10 | 0.96 | 0.14 | 15 |
(1) | Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customers or foreign railroads and excludes the time and distance travelled by: i) trains used in or around CP's yards; ii) passenger trains; and iii) trains used for repairing track. |
(2) | Locomotive productivity is defined as daily GTMs divided by daily average operating horsepower. Operating horsepower excludes units offline, up or in storage, or in use on other railways, and includes foreign units online. |
(3) | Fuel efficiency is defined as |
(4) | Includes gallons of fuel consumed from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. |
(5) | An employee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with CP. |
(6) | Workforce is defined as total employees plus contractors and consultants. |
(7) | FRA personal injuries per 200,000 employee-hours for the three months ended |
Non-GAAP Measures
The Company presents Non-GAAP measures to provide a basis for evaluating underlying earnings and liquidity trends in the Company's business that can be compared with the results of operations in prior periods. In addition, these Non-GAAP measures facilitate a multi-period assessment of long-term profitability, allowing management and other external users of the Company's consolidated financial information to compare profitability on a long-term basis, including assessing future profitability, with that of the Company's peers.
These Non-GAAP measures have no standardized meaning and are not defined by accounting principles generally accepted in
Non-GAAP Performance Measures
The Company uses adjusted earnings results including Adjusted income, Adjusted diluted earnings per share, Adjusted operating income and Adjusted operating ratio to evaluate the Company's operating performance and for planning and forecasting future business operations and future profitability. These Non-GAAP measures provide meaningful supplemental information regarding operating results because they exclude certain significant items that are not considered indicative of future financial trends either by nature or amount. As a result, these items are excluded for management assessment of operational performance, allocation of resources and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, acquisition-related costs (including legal, consulting, and financing fees, fair value gain or loss on FX forward contracts and interest rate hedges, FX gain on
Significant items that impact reported earnings for 2021 and 2020 include:
2021:
- in the fourth quarter, a deferred tax recovery of
$33 million on changes in the outside basis difference of the equity investment in KCS that favourably impacted Diluted EPS by5 cents ; - in the second quarter, merger termination payment received of
$845 million ($748 million after current taxes) in connection with KCS's termination of the Original Merger Agreement effectiveMay 21, 2021 , that favourably impacted Diluted EPS by$1.11 ; - during the course of the year, acquisition-related costs of
$599 million in connection with the KCS acquisition ($500 million after current tax recovery of$107 million net of deferred tax expense of$8 million ), including an expense of$183 million recognized in Purchased services and other,$169 million recognized in Equity loss of KCS, and$247 million recognized in Other expense (income), that unfavourably impacted Diluted EPS by75 cents as follows: - in the fourth quarter, acquisition-related costs of
$157 million ($157 million after current tax recovery of$13 million net of deferred tax expense of$13 million ), including costs of$36 million recognized in Purchased services and other,$169 million in Equity loss of KCS, and a$48 million recovery recognized in Other (income) expense, that unfavourably impacted Diluted EPS by22 cents ; - in the third quarter, acquisition-related costs of
$98 million ($80 million after current tax recovery of$61 million net of deferred tax expense of$43 million ), including costs of$15 million recognized in Purchased services and other and$83 million recognized in Other expense (income), that unfavourably impacted Diluted EPS by12 cents ; - in the second quarter, acquisition-related costs of
$308 million ($236 million after current taxes of$25 million and deferred taxes of$47 million ), including costs of$99 million recognized in Purchased services and other and$209 million recognized in Other expense (income), that unfavourably impacted Diluted EPS by35 cents ; and - in the first quarter, acquisition-related costs of
$36 million ($27 million after current taxes of$8 million and deferred taxes of$1 million ), including costs of$33 million recognized in Purchased services and other and$3 million recognized in Other expense (income), that unfavourably impacted Diluted EPS by4 cents ; and - during the course of the year, a net non-cash gain of
$7 million ($6 million after deferred tax) due to FX translation of debt and lease liabilities that favourably impacted Diluted EPS by1 cents as follows: - in the fourth quarter, a
$32 million loss ($28 million after deferred tax) that unfavourably impacted Diluted EPS by4 cents ; - in the third quarter, a
$46 million loss ($40 million after deferred tax) that unfavourably impacted Diluted EPS by6 cents ; - in the second quarter, a
$52 million gain ($45 million after deferred tax) that favourably impacted Diluted EPS by7 cents ; and - in the first quarter, a
$33 million gain ($29 million after deferred tax) that favourably impacted Diluted EPS by4 cents .
2020:
- in the fourth quarter, a deferred tax recovery of
$29 million due to a change relating to a tax return filing election for the state ofNorth Dakota that favourably impacted Diluted EPS by5 cents ; and - during the course of the year, a net non-cash gain of
$14 million ($12 million after deferred tax) due to FX translation of debt and lease liabilities that favourably impacted Diluted EPS by2 cents as follows: - in the fourth quarter, a
$103 million gain ($90 million after deferred tax) that favourably impacted Diluted EPS by13 cents ; - in the third quarter, a
$40 million gain ($38 million after deferred tax) that favourably impacted Diluted EPS by6 cents ; - in the second quarter, an
$86 million gain ($82 million after deferred tax) that favourably impacted Diluted EPS by12 cents ; and - in the first quarter, a
$215 million loss ($198 million after deferred tax) that unfavourably impacted Diluted EPS by28 cents .
Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures
The following tables reconcile the most directly comparable measures presented in accordance with GAAP to the Non-GAAP measures:
Adjusted income is calculated as Net income reported on a GAAP basis adjusted for significant items.
For the three months | For the year ended | |||||||
(in millions) | 2021 | 2020 | 2021 | 2020 | ||||
Net income as reported | $ | 532 | $ | 802 | $ | 2,852 | $ | 2,444 |
Less significant items (pre-tax): | ||||||||
Acquisition-related costs | (157) | — | (599) | — | ||||
Merger termination fee | — | — | 845 | — | ||||
Impact of FX translation (loss) gain on debt and lease liabilities | (32) | 103 | 7 | 14 | ||||
Add: | ||||||||
Tax effect of adjustments(1) | (4) | 13 | (1) | 2 | ||||
Deferred tax recovery on the outside basis difference of the investment in | (33) | — | (33) | — | ||||
Income tax rate changes | — | (29) | — | (29) | ||||
Adjusted income | $ | 684 | $ | 683 | $ | 2,565 | $ | 2,403 |
(1) | The tax effect of adjustments was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 2.27% and 0.51% for the three months and year ended |
Adjusted diluted earnings per share is calculated using Adjusted income, as defined above, divided by the weighted-average diluted number of Common Shares outstanding during the period as determined in accordance with GAAP.
For the three months | For the year ended | |||||||
2021 | 2020 | 2021 | 2020 | |||||
Diluted earnings per share as reported | $ | 0.74 | $ | 1.19 | $ | 4.18 | $ | 3.59 |
Less significant items (pre-tax): | ||||||||
Acquisition-related costs | (0.22) | — | (0.88) | — | ||||
Merger termination fee | — | — | 1.24 | — | ||||
Impact of FX translation (loss) gain on debt and lease liabilities | (0.05) | 0.15 | 0.01 | 0.02 | ||||
Add: | ||||||||
Tax effect of adjustments(1) | (0.01) | 0.02 | — | — | ||||
Deferred tax recovery on the outside basis difference of the investment in | (0.05) | — | (0.05) | — | ||||
Income tax rate changes | — | (0.05) | — | (0.04) | ||||
Adjusted diluted earnings per share | $ | 0.95 | $ | 1.01 | $ | 3.76 | $ | 3.53 |
(1) | The tax effect of adjustments was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 2.27% and 0.51% for the three months and year ended |
Adjusted operating income is calculated as Operating income reported on a GAAP basis less significant items.
For the three months | For the year ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Operating income as reported | $ | 832 | $ | 928 | $ | 3,206 | $ | 3,311 |
Less significant item: | ||||||||
Acquisition-related costs | (36) | — | (183) | — | ||||
Adjusted operating income | $ | 868 | $ | 928 | $ | 3,389 | $ | 3,311 |
Adjusted operating ratio excludes those significant items that are reported within operating income.
For the three months | For the year ended | |||||||
2021 | 2020 | 2021 | 2020 | |||||
Operating ratio as reported | 59.2 | % | 53.9 | % | 59.9 | % | 57.1 | % |
Less significant item: | ||||||||
Acquisition-related costs | 1.7 | % | — | % | 2.3 | % | — | % |
Adjusted operating ratio | 57.5 | % | 53.9 | % | 57.6 | % | 57.1 | % |
Adjusted Return on
Adjusted ROIC is calculated as Adjusted return divided by Adjusted average invested capital. Adjusted return is defined as Net income adjusted for interest expense, tax effected at the Company's adjusted annualized effective tax rate, and significant items in the Company's Consolidated Financial Statements, tax effected at the applicable tax rate. Adjusted average invested capital is defined as the sum of total Shareholders' equity, Long-term debt, and Long-term debt maturing within one year, as presented in the Company's Consolidated Financial Statements, each averaged between the beginning and ending balance over a rolling 12-month period, adjusted for the impact of significant items, tax effected at the applicable tax rate, on closing balances as part of this average. Adjusted ROIC excludes significant items reported in the Company's Consolidated Financial Statements, as these significant items are not considered indicative of future financial trends either by nature or amount, and excludes interest expense, net of tax, to incorporate returns on the Company's overall capitalization. Adjusted ROIC is a performance measure that measures how productively the Company uses its long-term capital investments, representing critical indicators of good operating and investment decisions made by management, and is an important performance criteria in determining certain elements of the Company's long-term incentive plan. Adjusted ROIC is reconciled below from Return on average shareholders' equity, the most comparable measure calculated in accordance with GAAP.
Calculation of Return on average shareholders' equity
For the year ended | ||||
(in millions, except for percentages) | 2021 | 2020 | ||
Net income as reported | $ | 2,852 | $ | 2,444 |
Average shareholders' equity | $ | 20,574 | $ | 7,194 |
Return on average shareholders' equity | 13.9% | 34.0% |
Reconciliation of Net income to Adjusted return
For the year ended | ||||
(in millions) | 2021 | 2020 | ||
Net income as reported | $ | 2,852 | $ | 2,444 |
Add: | ||||
Net interest expense | 440 | 458 | ||
Tax on interest(1) | (106) | (113) | ||
Significant items: | ||||
Acquisition-related costs | 599 | — | ||
Merger termination fee | (845) | — | ||
Impact of FX translation gain on debt | (7) | (14) | ||
Tax on significant items(2) | (1) | 2 | ||
Deferred tax recovery on the outside basis | (33) | — | ||
Income tax rate changes | — | (29) | ||
Adjusted return | $ | 2,899 | $ | 2,748 |
(1) | Tax was calculated at the adjusted annualized effective tax rate of 23.85% and 24.61% for each of the above items for the years ended |
(2) | Tax was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 0.51% and 13.58% for the years ended |
Reconciliation of Average shareholders' equity to Adjusted average invested capital
For the year ended | ||||
(in millions) | 2021 | 2020 | ||
Average shareholders' equity | $ | 20,574 | $ | 7,194 |
Average Long-term debt, including long-term | 14,949 | 9,264 | ||
$ | 35,523 | $ | 16,458 | |
Less: | ||||
Significant items (pre-tax): | ||||
Acquisition-related costs | (300) | — | ||
Merger termination fee | 423 | — | ||
Tax on significant items(1) | 1 | — | ||
Deferred tax recovery on the outside basis difference of the | 16 | — | ||
Income tax rate changes | — | 15 | ||
Adjusted average invested capital | $ | 35,383 | $ | 16,443 |
(1) | Tax was calculated at the pre-tax effect of the adjustment multiplied by the applicable tax rate of 0.90% for the twelve months ended |
Calculation of Adjusted ROIC
For the year ended | ||||
(in millions, except for percentages) | 2021 | 2020 | ||
Adjusted return | $ | 2,899 | $ | 2,748 |
Adjusted average invested capital | $ | 35,383 | $ | 16,443 |
Adjusted ROIC | 8.2% | 16.7% |
Free Cash
Free cash is calculated as Cash provided by operating activities, less Cash used in investing activities, adjusted for changes in cash and cash equivalents balances resulting from FX fluctuations, the operating cash flow impacts of acquisition-related costs associated with the KCS transaction including settlement of cash flow hedges upon debt issuance and FX gain on
Reconciliation of Cash Provided by Operating Activities to Free Cash
For the three months | For the year ended | |||||||
(in millions) | 2021 | 2020 | 2021 | 2020 | ||||
Cash provided by operating activities | $ | 604 | $ | 985 | $ | 3,688 | $ | 2,802 |
Cash used in investing activities | (10,910) | (717) | (13,730) | (2,030) | ||||
Effect of foreign currency fluctuations on | 35 | (6) | 41 | 6 | ||||
Less: | ||||||||
Acquisition-related costs | (293) | — | (340) | — | ||||
Merger termination fee | — | — | 845 | — | ||||
Investment in Kansas City Southern | (10,526) | — | (12,299) | — | ||||
Investment in | — | — | — | 19 | ||||
Investment in | — | (398) | — | (398) | ||||
Free cash | $ | 548 | $ | 660 | $ | 1,793 | $ | 1,157 |
Foreign Exchange Adjusted % Change
FX adjusted % change allows certain financial results to be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons in the analysis of trends in business performance. Financial result variances at constant currency are obtained by translating the comparable period of the prior year results denominated in
FX adjusted % changes in revenues are further used in calculating FX adjusted % change in freight revenue per carload and RTM. FX adjusted % changes in revenues are as follows:
For the three months ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Freight revenues by line of business | |||||||||
Grain | $ | 440 | $ | 508 | $ | (7) | $ | 501 | (12) |
Coal | 134 | 155 | — | 155 | (14) | ||||
Potash | 115 | 103 | (2) | 101 | 14 | ||||
Fertilizers and sulphur | 78 | 78 | (2) | 76 | 3 | ||||
Forest products | 89 | 84 | (3) | 81 | 10 | ||||
Energy, chemicals and plastics | 414 | 366 | (6) | 360 | 15 | ||||
Metals, minerals and consumer products | 193 | 155 | (4) | 151 | 28 | ||||
Automotive | 87 | 109 | (3) | 106 | (18) | ||||
Intermodal | 444 | 410 | (4) | 406 | 9 | ||||
Freight revenues | 1,994 | 1,968 | (31) | 1,937 | 3 | ||||
Non-freight revenues | 46 | 44 | (1) | 43 | 7 | ||||
Total revenues | $ | 2,040 | $ | 2,012 | $ | (32) | $ | 1,980 | 3 |
For the year ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Freight revenues by line of business | |||||||||
Grain | $ | 1,684 | $ | 1,829 | $ | (48) | $ | 1,781 | (5) |
Coal | 625 | 566 | (4) | 562 | 11 | ||||
Potash | 463 | 493 | (16) | 477 | (3) | ||||
Fertilizers and sulphur | 305 | 290 | (14) | 276 | 11 | ||||
Forest products | 348 | 328 | (18) | 310 | 12 | ||||
Energy, chemicals and plastics | 1,563 | 1,519 | (53) | 1,466 | 7 | ||||
Metals, minerals and consumer products | 728 | 629 | (31) | 598 | 22 | ||||
Automotive | 376 | 324 | (15) | 309 | 22 | ||||
Intermodal | 1,724 | 1,563 | (27) | 1,536 | 12 | ||||
Freight revenues | 7,816 | 7,541 | (226) | 7,315 | 7 | ||||
Non-freight revenues | 179 | 169 | (2) | 167 | 7 | ||||
Total revenues | $ | 7,995 | $ | 7,710 | $ | (228) | $ | 7,482 | 7 |
FX adjusted % changes in operating expenses are as follows:
For the three months ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Compensation and benefits | $ | 405 | $ | 433 | $ | (3) | $ | 430 | (6) |
Fuel | 231 | 169 | (4) | 165 | 40 | ||||
Materials | 51 | 54 | — | 54 | (6) | ||||
Equipment rents | 29 | 34 | (1) | 33 | (12) | ||||
Depreciation and amortization | 206 | 197 | (2) | 195 | 6 | ||||
Purchased services and other | 286 | 197 | (3) | 194 | 47 | ||||
Total operating expenses | $ | 1,208 | $ | 1,084 | $ | (13) | $ | 1,071 | 13 |
For the year ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Compensation and benefits | $ | 1,570 | $ | 1,560 | $ | (27) | $ | 1,533 | 2 |
Fuel | 854 | 652 | (29) | 623 | 37 | ||||
Materials | 215 | 216 | (3) | 213 | 1 | ||||
Equipment rents | 121 | 142 | (8) | 134 | (10) | ||||
Depreciation and amortization | 811 | 779 | (14) | 765 | 6 | ||||
Purchased services and other | 1,218 | 1,050 | (30) | 1,020 | 19 | ||||
Total operating expenses | $ | 4,789 | $ | 4,399 | $ | (111) | $ | 4,288 | 12 |
FX adjusted % change in operating income is as follows:
For the three months ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Operating income | $ | 832 | $ | 928 | $ | (19) | $ | 909 | (8) |
For the year ended | |||||||||
(in millions) | Reported | Reported | Variance due to FX | FX Adjusted | FX Adjusted | ||||
Operating income | $ | 3,206 | $ | 3,311 | $ | (117) | $ | 3,194 | — |
Dividend Payout Ratio and Adjusted Dividend Payout Ratio
Dividend payout ratio is calculated as dividends declared per share divided by Diluted EPS. Adjusted dividend payout ratio is calculated as dividends declared per share divided by Adjusted diluted EPS, as defined above. This ratio is a measure of shareholder return and provides information on the Company's ability to declare dividends on an ongoing basis, excluding significant items.
Calculation of Dividend Payout Ratio
For the year ended | ||||
(in dollars, except for percentages) | 2021 | 2020 | ||
Dividends declared per share | $ | 0.7600 | $ | 0.7120 |
Diluted EPS | 4.18 | 3.59 | ||
Dividend payout ratio | 18.2% | 19.8% |
Calculation of Adjusted Dividend Payout Ratio
For the year ended | ||||
(in dollars, except for percentages) | 2021 | 2020 | ||
Dividends declared per share | $ | 0.7600 | $ | 0.7120 |
Adjusted diluted EPS | 3.76 | 3.53 | ||
Adjusted dividend payout ratio | 20.2% | 20.1% |
Adjusted Net Debt to Adjusted EBITDA Ratio
Adjusted net debt to Adjusted earnings before interest, tax, depreciation and amortization ("EBITDA") ratio is calculated as Adjusted net debt divided by Adjusted EBITDA. The Adjusted net debt to Adjusted EBITDA ratio is a key credit measure used to assess the Company's financial capacity. The ratio provides information on the Company's ability to service its debt and other long-term obligations from operations, excluding significant items. The Adjusted net debt to Adjusted EBITDA ratio is reconciled below from the Long-term debt to Net income ratio, the most comparable measure calculated in accordance with GAAP.
Calculation of Long-term Debt to Net Income Ratio
(in millions, except for ratios) | 2021 | 2020 | ||
Long-term debt including long-term debt maturing within one year as at | $ | 20,127 | $ | 9,771 |
Net income for the year ended | $ | 2,852 | $ | 2,444 |
Long-term debt to Net income ratio | 7.1 | 4.0 |
Reconciliation of Long-term Debt to Adjusted Net Debt
Adjusted net debt is defined as Long-term debt, Long-term debt maturing within one year and Short-term borrowing as reported on the Company's Consolidated Balance Sheets adjusted for pension plans deficit, operating lease liabilities recognized on the Company's Consolidated Balance Sheets, and Cash and cash equivalents. Adjusted net debt is used as a measure of debt and long-term obligations as part of the calculation of Adjusted Net Debt to Adjusted EBITDA.
(in millions) | 2021 | 2020 | ||
Long-term debt including long-term debt maturing within one year as at | $ | 20,127 | $ | 9,771 |
Add: | ||||
Pension plans deficit(1) | 263 | 328 | ||
Operating lease liabilities | 283 | 311 | ||
Less: | ||||
Cash and cash equivalents | 69 | 147 | ||
Adjusted net debt as at | $ | 20,604 | $ | 10,263 |
(1) | Pension plans deficit is the total funded status of the Pension plans in deficit only. |
Reconciliation of Net Income to EBIT, Adjusted EBIT and Adjusted EBITDA
Earnings before interest and tax ("EBIT") is calculated as Net income before Net interest expense and Income tax expense. Adjusted EBIT excludes significant items reported in both Operating income and Other (income) expense. Adjusted EBITDA is calculated as Adjusted EBIT plus operating lease expense and Depreciation and amortization, less Other components of net periodic benefit recovery. Adjusted EBITDA is used as a measure of liquidity derived from operations, excluding significant items, as part of the calculation of Adjusted Net Debt to Adjusted EBITDA.
For the year ended | ||||
(in millions) | 2021 | 2020 | ||
Net income as reported | $ | 2,852 | $ | 2,444 |
Add: | ||||
Net interest expense | 440 | 458 | ||
Income tax expense | 768 | 758 | ||
EBIT | 4,060 | 3,660 | ||
Less significant items (pre-tax): | ||||
Acquisition-related costs | (599) | — | ||
Merger termination fee | 845 | — | ||
Impact of FX translation gain on debt and lease liabilities | 7 | 14 | ||
Adjusted EBIT | 3,807 | 3,646 | ||
Add: | ||||
Operating lease expense | 72 | 78 | ||
Depreciation and amortization | 811 | 779 | ||
Less: | ||||
Other components of net periodic benefit recovery | 387 | 342 | ||
Adjusted EBITDA | $ | 4,303 | $ | 4,161 |
Calculation of Adjusted Net Debt to Adjusted EBITDA Ratio
(in millions, except for ratios) | 2021 | 2020 | ||
Adjusted net debt as at | $ | 20,604 | $ | 10,263 |
Adjusted EBITDA for the twelve months ended | $ | 4,303 | $ | 4,161 |
Adjusted net debt to Adjusted EBITDA ratio | 4.8 | 2.5 |
View original content:https://www.prnewswire.com/news-releases/cp-delivers-solid-fourth-quarter-results-prepared-to-make-history-in-2022-301470133.html
SOURCE Canadian Pacific
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